Of DOW JONES NEWSWIRESBANGALORE (Dow Jones)--India's Sistema Shyam TeleServices Ltd., a unit of Russia's Sistema JSFC (SSA.LN), said Thursday it has agreed to sell a nearly 20% stake to the Russian government for $676.9 million, giving the company much-needed funds to expand operations in India's mobile-telephony market.
Unlisted Sistema Shyam will issue 662.75 million shares, representing a 19.8% stake, on a preferred basis to the Russian Federal Property Agency at 49.31 rupees (2 US cents) each, the company said in a statement. It will also issue up to 228.55 million shares to its Indian founders at par, or INR10 a share.
Sistema currently owns 73.71% of Sistema Shyam, while India's Shyam Group holds 23.79%. The remainder is held by minority shareholders.
A person close to Sistema described the Russian government's acquisition of Sistema Shyam shares as a "financing arrangement," saying Sistema will pledge to buy back the government's SSTL shares in five years' time.
She said the price Sistema pays in five years will include interest, or could be the market price for the stock.
The deal will reduce the holding of Sistema in the Indian company to about 54%. The allotment of shares to the Indian founders will, however, help Sistema Shyam keep the total foreign stake in it below the government-mandated limit of 74% for telecom firms.
Sistema Shyam currently provides mobile services on the code division multiple access, or CDMA, platform in eight of India's 22 telecom service areas and had 2.30 million users at the end of October.
It is one of the new entrants to India's crowded mobile-services market, the second-largest and the fastest-growing by number of subscribers. While new service providers try to launch their operators without delay across India to gather market share--increasing their fund requirements--a price war among companies is making their margins low.
Sistema Shyam Chief Executive Vsevolod Rozanov had said earlier the Russian investment would come from that country's reserve balance of $2 billion currently parked with India's central bank. Russia has to invest that amount in Indian projects under earlier agreements between the two countries.
"The new share-holding pattern will improve the financial stability of SSTL [Sistema Shyam] and will increase its share value," Rozanov said Thursday.
The funds from the share sale will be used to develop the company's business in the telecom service areas where it currently operates and to set up networks in regions it doesn't currently cover, he said.
The deal is expected to close before Dec. 31, a spokesman for Sistema Shyam told Dow Jones Newswires.
-By Dhanya Ann Thoppil and R. Jai Krishna, Dow Jones Newswires; +91.11.4356.3333; krishna.jai@dowjones.com
(Will Bland in Moscow contributed to this story.)
Posts
